March 28, 2013, 3:51 PM

RIGHT AWAY, PLEASE

E-retailers kick the tires of same-day delivery, hoping shoppers will come along for the ride.

Lead Photo

For a few days before Christmas, the United Kingdom's Argos retail chain tried something bold: It offered same-day delivery of online orders—for free.

"We saw some movement" in the number of customers completing orders, says Brian McCarthy, director of home delivery for Argos, without providing details.

It was a costly offer, but an effective way to expand the retailer's base of loyal customers, he adds. "The whole market of competition is changing," he says. "Loyalty to brand is less; loyalty to price is stronger. It's the same with same-day delivery services. The value to the retailer is the frequency of customers shopping."

Argos, a subsidiary of Home Retail Group, operates more than 730 general merchandise stores throughout the United Kingdom and is offering same-day delivery to about half of its customers across more than 50 U.K. towns. It provides the service through London-based Shutl, a company that dispatches online orders to local courier services based on such factors as availability, location and the courier's past performance.

Shutl—which promises to deliver within 90 minutes of receiving an online order or within a scheduled 60-minute window throughout the day—is making inroads in the United States and Canada. Last month it began operating in New York, San Francisco and Chicago, and it plans to enter 17 more North American cities this year.

Argos' launch of same-day delivery is an example of what's suddenly a hot trend in online retail—offering shoppers the option of receiving goods the same day, letting them get the goods as quickly as they could by going to a store. While evidence is scant that many consumers are demanding such fast service, retailers and delivery companies are working to bring the same-day delivery cost low enough to spark interest.

Among the recent entrants in the same-day delivery race is Metro Post, which the U.S. Postal Service launched last November as a test in San Francisco with 1-800-Flowers.com Inc. and other retailers. Since October, Wal-Mart Stores Inc. has offered Walmart to Go, using its own trucks to deliver online orders the day they're placed by picking up goods from Wal-Mart stores in five metro areas—Northern Virginia, Philadelphia, Minneapolis, San Jose/San Francisco and Denver. Also in October, eBay Inc. rolled out eBay Now, a mobile app for managing local courier pick-up and delivery services that retailers such as Target Corp., Macy's Inc. and Best Buy Co. Inc. are testing in New York and San Francisco. And Amazon.com Inc., the world's largest retailer by web sales, has since late 2009 offered its own same-day delivery service, now in 10 of the largest U.S. markets.

Many retail chains are at least looking at same-day delivery, if not already making plans for it, figuring they need to explore any service that will help them compete on the web where they are seeing their strongest growth, Al Sambar, a logistics and retail strategist at consulting firm Kurt Salmon, says. "For most of our retailer clients, their largest growth channel is digital, so they're expanding merchandise assortments online and trying to deliver to their online customers in as many ways as they can," he says.

Same-day delivery is far from a proven strategy for winning customers or boosting profits, industry experts say. Retailers that have several stores or fulfillment centers in a major market, one of the requirements for offering same-day delivery of online orders, can offer expedited one- or two-day shipping for far less cost than same-day delivery, or in-store pickup for no cost to the shopper. "It raises the question: Will customers pay a premium for same-day delivery?" Sambar says.

In some cases, the answer has been a flat-out no, he says. One client retailer that he wasn't free to name got few takers when it offered same-day deliveries in New York and San Francisco. "Few customers were willing to use the service except when the retailer promoted it at a discounted fee or for free," he says. "Customers weren't willing to pay a premium price if they could just pick up their product in a store after ordering it online." Fees for same-day delivery typically average close to $10, and they can vary based on the size of an order and the delivery distance, experts say.

In another example, retail chain Moosejaw Mountaineering introduced on Dec. 22 same-day delivery in the Chicago and Denver-Boulder markets for orders placed up until 5 p.m. on Christmas Eve. The fee was $14.99. "We had a couple of people call to see if it was for real, but no one ended up using the service," says Eoin Comerford, Moosejaw president and CEO. He says that may be because consumers weren't used to the service and may not have trusted that their gifts would arrive before Christmas. Nor did the retailer promote it heavily, he says.

Nonetheless, some are willing to bet on the same-day concept. UPS Inc., the most commonly used carrier by retailers among the Internet Retailer Top 1000 for standard ground or one- or two-day shipping, is among a team of investors in Shutl that includes the Europe-based delivery services company GeoPost and venture capital firms e.ventures, Hummingbird Ventures and Notion Capital. To date, the backers have invested more than $5 million in Shutl since last October. Shutl says it's using the funds to develop its marketing in the United States and Canada.

Moreover, the new crop of same-day services all promise to go beyond what Amazon offers by delivering from retail stores online orders placed by 2 p.m. or even into the later afternoon or evening hours. In comparison, Amazon restricts same-day delivery to orders placed online between 7 a.m. and noon, depending on the city. Walmart.com generally accepts orders for same-day delivery until noon, and lets shoppers choose a 4-hour delivery window running to late in the evening.

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